There are a number of great ways to save taxes. You need to make use of the tax-saving instruments wisely, in order to minimize your tax payments. There are several income tax exemptions available under the income tax act and here we will discuss all of the same.
There are people who relocate from one city to another in order to seek new job opportunities. For instance, IT professionals from all parts of the country need to relocate to metro cities such as Bangalore, Delhi, Pune etc as these are the only cities that offer jobs to IT professionals. Consequently, they need to rent an accommodation.
They have no choice other than renting an apartment as their duty demands this. One cannot avoid this expense even if they wish, as this is a job requirement. As a result, the rent paid by the user is exempted from taxes by the India Government. On the other hand, the employer needs to give house rent allowance.
A minimum of the following is the income tax exemption that one gets from the House Rent Allowance:
In such cases, the salary is equal to the basic sum inclusive of the dearness allowance (basic + DA).
You spend some money in order to commute from your house to your workplace. This is an expenditure that you cannot avoid even if you want to. Consequently, transport allowances of up to Rs.19,200 per annum or Rs.1,600 per month can be exempted from being subject to income tax by the Indian Government, if your employer provides you with an allowance for commuting which is known as the transport allowance. For this, you do not need to provide any receipt of the expenditure that you make on commuting to the office. On the other hand, Rs 1600 is the monthly income which needs to be paid. Before the exemption limit was capped at Rs.9.600 per year and Rs.800 per month.
Children Education Allowance is another form of expenditure on which income tax exemption is applicable. This benefit is given by the employer to their employees so that they can make use of them in order to get the income tax exemptions. The monthly limit of this plan is Rs. 100, only for 2 children.
Hostel Subsidy is a type of income tax exemption which is connected to children’s education policy. This subsidy is received up to Rs. 300 on a monthly basis, only for two children.
Added Allowance that Can Get Tax Benefit as Income Tax Exemptions:-
The allowances mentioned above are tax-free, but make sure that you submit the genuine proof of the expense.
This type of income tax exemption is applicable because you need to change your place due to the job. After relocating you might opt to purchase a house on loan rather than renting one. In case of a home loan, the payment of interest is exempted from tax. This helps the person to get a maximum income tax exemption for about Rs 2 Lakh on interest levied on housing loan.
On top of this, there are certain conditions that are applicable to this type of income tax exemption. One of them is that the house needs to be occupied by the owner. This exemption is applicable only if your house is still under construction. But the construction is must be completed within a time span of 3 years. Moreover, an individual can also claim the principal component of the repayment of housing loan as deduction under section 80C of IT Act up to the maximum limit of Rs.1.5 lakh.
Government wishes to encourage some types of expenses and investments. In order to realize this goal, it has given the advantage of income tax exemption. Subsequently, we have several investments as well as expenses offered by section 80C, 80CCC and 80CCD. On the other hand, the total deduction in this section is only up to Rs 1.5 Lakh.
As per section 80D, the income tax exemption is applicable for those who have taken a medical insurance for themselves, family as well as their parents. Under Section 80D of IT Act, one can claim the deduction on the medical expenses. The limit of 80D exemption is Rs.25,000 for the premium paid for family/self. In case of senior citizen, tax exemption claim can be made up to Rs.50,000. Moreover, health checkups to the limit of Rs.5,000 are also allowed and covered within the overall limit.
This section offers an additional income tax exemption of about Rs 50,000. Following are the conditions that you need to fulfil in order to avail the benefits of this section:
Therefore, any amount deposited under any scheme taken for the differently abled dependent will be entitled to income tax exemption. Deductions of about Rs 1, 00,000 can be claimed if the dependent is suffering from any severe disability.
This deduction is primarily for those who need to get treatment for serious disease. As per this section, a person can avail a deduction of Rs 40,000 against their income tax.
Similar to the home loan interest, income tax exemptions can also be claimed for interest on education loans.
The donations mentioned in Section 80G are entitled to income tax exemption. The deductions vary depending on the kind of receiver, which means that it may be 100% or 50% of the donation made.
Employees who are unable to leverage allowance for house rent are eligible for this deduction from their company. As per the specified rules, these people are eligible for this income tax exemption if the exemption is lower of
There are a few clauses to receive this benefit.
If the yearly taxable income is less than Rs 10,000, then the interest received on the saving account is not counted in the taxable income.
As per section 80U, anyone suffering from a disability is eligible to get an extra income tax exemption from their taxable income. In such cases, Rs 50,000 can be deducted from their taxable income. Moreover, in the case of severe disabilities, the deductions can even be Rs 1, 00,000. To get the benefits from this deduction, one needs to get a certificate from a doctor who works in a government hospital.